My turn: The oil industry: our golden goose

Posted: Wednesday, October 24, 2007

By ERIC BADGER

As this letter is being typed, I am reminded of the story about the goose that laid the golden egg. The basic moral that story teaches is greed will destroy the source of good. In other terms it might mean, keep the goose healthy, happy and producing golden eggs, and you will have a daily addition to your wealth.

As citizens of this state we have been extremely fortunate that over the past two to three decades, we have had a relatively healthy and happy goose that has continued to produce golden eggs for us through good economic times as well as bad. That goose has been the oil industry. And that goose continues to add to the wealth that allows every citizen of this state to receive a paycheck every year instead of a tax bill. It's a goose that continues to add wealth that supports that paycheck and all of our state government needs.

The oil industry has been very healthy of late due to the high price of crude on world markets. The world market price fluctuates based on what people are willing to pay versus what the producers are willing to sell for, based on the amount of supply produced or expected to be produced. Just because the oil industry is doing well now, we should not hold that against them and expect that we need a bigger take of the profits they have earned. We should allow them to reinvest some of those profits back into our aging oil fields to produce more, and keep our golden eggs coming into the state Treasury. It wasn't long ago, that many of the major producers were struggling to keep up with the huge debts that come with exploring for oil around the world.

For example, look at some of the top producers in our state. None are the same company as 20 years ago. ARCO, which used to be the big guy on the North Slope, has now been folded into Conoco-Phillips. Conoco-Phillips is now a mixture of all or some of the pieces of ARCO, Conoco-Phillips, and the downstream assets of Unocal. Exxon used to stand on its own, but is now Exxon-Mobil. BP now has parts of Amaco. Chevron is now Chevron-Texaco, and has the upstream assets of Unocal. They all consolidated somewhat during periods of low crude oil prices, high production costs and low margins in order to get more efficient and do their best to produce a profit for their shareholders.

Four of the top 50 producing stocks for the Alaska Permanent Fund are included in some of those companies named above (Exxon, Chevron, Conoco-Phillips and BP). So we have also benefited from their success, as shareholders as well. Alaska has been able to take the revenues and profits generated from taxes and royalties to turn around and reinvest in those companies that are again producing profits for us the shareholders in Alaska. What a deal, they give us the profits to invest, and we get to profit off those profits. Only in America.

Come on Alaska, let's wise up before we kill or drive off the goose that laid our golden egg. Let's be fair to our partners in the oil fields by providing a known stable tax system that they can count, and quit going to the well every time we feel we aren't getting our fair share. Provide that and some incentives to build a gas line, and ensure that we will all continue to collect an annual paycheck from the profits, instead of paying the tax man.